Growth in world merchandise trade is set to remain strong in 2018 and 2019, after recording its highest increase in six years in 2017. According to WTO economists, continued expansion depends on strong global economic growth and governments implementing appropriate monetary, fiscal and, above all, trade policies.
The WTO forecasts 4.4% growth in the volume of merchandise trade in 2018, as measured by the average of exports and imports, broadly unchanged from the 4.7% recorded in 2017. The growth rate is expected to fall back to 4.0% in 2019, below the average rate of 4.8% recorded since 1990, but still well above the post-crisis average (3.0%). However, there are signs that escalating trade tensions may already be affecting business confidence and investment decisions, which could jeopardize the current outlook.
"The strong growth in trade we are seeing today will be vital to sustain economic growth and recovery, and to support job creation. However, this important progress could be quickly undermined if governments resort to restrictive trade policies, particularly in a process of measures and countermeasures that could lead to an unmanageable escalation. A cycle of retaliation is the last thing the global economy needs. Collective action is the best way to solve the urgent trade problems facing WTO members. I urge governments to show restraint and resolve their differences through dialogue and resolute engagement", said WTO Director-General Roberto Azevêdo.
The growth in trade volume in 2017, the strongest since 2011, was mainly due to cyclical factors, in particular the rise in investment and consumer spending. In terms of value, growth rates in current US dollars in 2017 (10.7% for merchandise exports, 7.4% for commercial services exports) were even more marked, reflecting both increased quantities and higher prices. Merchandise trade volume growth in 2017 may also have been somewhat inflated by the trade weakness seen in the previous two years, resulting in a lower starting base for the current expansion.
Until recently, the risks to forecasts appeared more balanced than at any time since the financial crisis. However, in view of recent developments in trade policy, they should now be considered to be on a downward trend. Increased recourse to restrictive trade measures, and the uncertainty they engender among businesses and consumers, could lead to cycles of retaliation that would weigh heavily on global trade and production. Faster monetary tightening by central banks could trigger fluctuations in exchange rates and capital flows that could disrupt trade flows just as much. Last but not least, worsening geopolitical tensions will slow trade flows, even if their impact cannot be anticipated. With technological change, conflicts may increasingly take the form of cyber-attacks, which could have as much or more impact on trade in services than in goods.